Turkey is in trouble.
It's banks cannot pay their foreign currency debts.
People have borrowed in cheap foreign currencies and now cannot afford to repay.
Inflation is out of control.
The economy is overheated.
Erdogan is President and not showing willing to appreciate the problem.
But very few have noted what a core element in the problem is. That is Turkey's shadow economy. This has averaged 31% over the last two decades (See page 54 here).
Every rule of sound management of a currency has been broken. It has not been used to collect tax. Parallel currencies of consequent greater value have been allowed to circulate in its place. And the government has lost control of its economy as a result.
People think tax gaps are just measures of tax authority efficiency. They are that. But they are very much more. They show whether a government is in charge of its economy and currency. And they are, then, able predictors of crises.
Tax gap measurement is, I think, a key macroeconomuc tool. We should get used to it.
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Where is Italy in the IMF black economy table?
Why is UK included and not most of the Club Med?
Perchance because they are all Incorporated under one great big black economy morass called the EU?
in which case why is not UK included after all we are still just about in by the skin of our teeth?
What are you talking about?
It’s there at 24.95%
Ahh… didn’t realise table 18 started at page 50 . Looked only at page 54 assuming this to be the totality.
.
Incidentally, Turkey may well indeed make it to Christmas but will not be HAPPY to do so — — — as on that date it will get eaten.
This sounds like Germany post World War 1. I’m worried.
But, Turkey is not Germany …
Very interesting. IF you could conduct such an analysis for the Chinese economy would be very interesting I suspect…
Turkey is stuffed. Groan.
Somebody stick the fork in, Turkey’s done 🙂
Mike, a sage comment?
Buckle up, this isn’t going to be nice: but it will only be surprising if you haven’t been looking at the news from Turkey that you don’t see on respectable media channels.
Turkey will make it to Christmas in a virtuoso display of national unity stage-managed by shelling another city inhabited by the hated and traitorous Kurds to rubble, and executing the survivors on TV.
They have the media for it and they have an appetite for it: that’s how nationalist politics works in its fully-realised end state.
They have done about half of it, and every time they do it, it has escalated. The only possible impediment that I can see is that they will simply run out of Kurds to murder.
Turks do genocide: they are indoctrinated to disdain and dehumanisation of their racial inferiors – or so they see it – and a great many of them thoroughly enjoy it.
The writers, academics, opposition politicians and journalists who might oppose it are now in prison, exiled, or dead.
The one thing that Ankara cannot pull out of the classical nationalist repertoire is invading a neighbouring country and propping up their addled economy by state-sponsored looting: they are already there, and the looting of Syria has stabilised into a well-established smuggling and money – laundering pipeline for the stolen oil.
That pipeline enriches Turkey’s generals and the ruling family, and finances the continuing conflict against ISIS.
And of course, the conflict ‘against’ ISIS provides a pretext and a budget for the ever-popular acts of genocide, and ill-disciplined acts of barbarism, by Turkish ‘Irregulars’ who are going to be very, very useful for the final collapse of their country’s internal repression into chaotic violence.
Turkey’s best hope is that Uncle Vladimir gets organised enough to become sole purchaser of Syria’s stolen oil, and that his financial leverage can impose some structure on the Generals’ regime in the successor state to the Republic of Turkey.
As hopes go, that’s unimaginably bleak: and it is the very best outcome that I can foresee.
I am astonished and disgusted that there is still sufficient trade with that regime for there to be a foreign-exchange crisis at all; but we are happy enough to sell our NATO ally more weapons, finance our exports, bank the laundered money and give diplomatic cover to their crimes against humanity.
Turkey will continue its descent: the only sense in which you’re right that Ture will not make it to Christmas is that the state that they’ll be in is unimaginable and unthinkable to any sane and civilised man.
Nile,
You may well strongly oppose the actions of the Turkish President and his party and there is much to oppose but to come out with a statement such as “Turks do genocide: they are indoctrinated to disdain and dehumanisation of their racial inferiors — or so they see it — and a great many of them thoroughly enjoy it.” is disgraceful and panders to a disgusting racism.
I would strongly suggest that you retract and apologise for this and I wonder how this fits with Richard’s rules of respectful behaviour. I guess it got missed in the mountain of responses he has to work through every day.
I struggled with it
But Nile is a regular commentator sho I tend to respect and so I felt he would have reasons for his argument
If I fell the wrong side – and I recognise that possibility – I apologise
I understand your reaction: it is natural for those who have not seen the worst in people, en masse and up close, to seek to see the best in people.
And, perhaps, to criticise those who have seen the worst, out of a belief that racist generalisations are in play.
You haven’t encountered Galataseray football fans: Turkey’s equivalent of Millwall supporters at their worst, and the National Front combined, if you can imagine thamem with state encouragement and police cooperation in large-scale racial violence.
I have, and I’ve seen them reacting to the footage of shelled Kurdish cities: they ‘do’ genocide, with relish, and it’the s not a spectator sport for them.
The worst of them are in the irregular bands in Syria.
Are they in the majority? Thankfully not.
Are there a lot of them? I would guess between 20 and 40 percent of the population have those views, and that violent extremism.
Roughly the same as Trump’s core supporters, ‘the deplorables’ and I do not doubt that all of *those* would be violent lynchers if the state put the full weight of its education system, leadership and media into encouraging that.
Given that the Turkish state did, and is now doing so with some determination, it is perhaps a compliment to the dominant ethnic group that so few – certainly less than half of the Turks – are stormtrooper material.
What of the rest?
Talk to Turks. Engage them in conversation. If they trust you, they will explore your politics, and open up a little about theirs: they are much more politically-engaged than the English, and they welcome the chance – with some caution – to speak to the rare Englishman with a genuine interest in learning about politics beyond his own little island
Some will share our outlook on human rights – but not your optimism about their fellow-citizens’ good nature! – and you will find them easily in England. They are harder to find in Istanbul, and they have reason to be cautious.
They are also, I think, quite rare: my guess is a third of the population in Intanbul and probably ten percent elsewhere would pass our definitions as ‘liberal’.
You will, even among the most liberal of Turks, overhear shocking remarks and offhand racism, slurs and disdain and casual epithets, for Kurds, Syrians, Greeks, Laz, Chechens, and black people. It’s normalised, just as colonialist racism was among the Edwardians.
It’s far worse than we were in the 1970’s.
The rest? All will deny that genocides have taken place in Turkish history, often with some vehemence.
Tiptoe around that, probe it with a little subtlety in your conversations: it’s something they’ve been taught, and have been taught to say.
Some do believe that there have been no genocides in Turkey’s history: ask them about the Holocaust, and the answers will worry you.
Some know all about it – too many participated for it to be suppressed or depersonalised as the acts of a distant and alien ‘SS’ – and you will tease it out of them, that their anger isn’t at ‘those foreigners’ accusation of a crime.
It’s the foreigners’ ingnorance, arrogance and folly in insisting that a patriotic Turk should be ashamed of this part of their history, and their present.
In short: modern Turkey is a nation defined by Nationalism. It’s explicit. It’s in their media, their education, in their conversations and, for some, in their actions.
And the worst of all actions enjoy the active support of a state with very, very serious corruption that places senior figures in the Army and the civil administration in positions of financial gain – dependency, even – on Turkey’s role in the neighbouring civil war, and on violent racist repression within their own borders.
The nationalism has now progressed to a de facto dictatorship with journalists, academics, and opposition politicians in prison.
It’s still progressing – if I use that word as I would of a fatal infection – and your urge to see the best in people would best be set aside, for Turkey.
I would urge you to redirect your anger to campaigning, if you can, against Britain’s barbaric practice of sending dissidents who seek asylum back there.
Nile,
I agree that nationalism is being abused in Turkey and this abuse is being ramped up but your blanket condemnation has to be challenged and was not warranted as you yourself now make clear.
Yes there are many dark stories in Turkey’s past and the whole Kurdish issue is being ramped up again for political gain – a sharp contrast with not so long ago where the growth of Kurdish parties in the Turkish parliament suggested a hope for reconciliation.
And I have been the away supporter at Besiktas where the riot police we were talking to were very pleased to be looking after us as opposed to the home fans so I know what passions are aroused. And I’ve enjoyed many trips to Millwall which in recent times has been a pretty good points gathering location for the mighty Bolton Wanderers!
Possibly an indicator but seems correlation not causation. The weakness of the tax base and lack of savings to provide local funds for investment is typical of developing economies like Turkey and absent capital controls excess global savings readily flow inward, causing overinvestment and exposure to crash on interest rate movements and capital withdrawals.
But the tax gap is not the cause – in a general sense the weakness of taxation or regulatory frameworks contribute to this and but more direct answer is capital flows. Plenty of more suitably taxed jurisdictions have had a crisis following excessive capital flows/foreign currency borrowing – e.g. European countries borrowing in Swiss Francs.
You might argue that tax is harder to control with open capital flows (and a greater tax gap likely to emerge) (stating the obvious).
Do you consider your country-by-country reporting tackles tax gaps or do you see it as a separate matter?
Also,here to start with a comment so wrong?
To take the last point first, of course my country-by-country reporting proposals help tackle the tax gap: that is one reason why they were created, and that is the reason why the OECD has adopted it. But it only deals with one part of the tax gap.
To pretend that the tax gap does not matter to the rest of the economy does seem extremely strange: I have already explained why will not repeat myself.
I have also made clear that savings do not fund investment: credit does.
I think the discussion of capital controls periphery in this case: the real problem is over stimulus of the economy to secure re-election of Erdogan, all using foreign borrowing. The net outcome is a credit crisis.
noted in previous postings your comments on country by country reporting and the HMRC’s miscalculations have been mostly separate hence my question.
I don’t disagree that a tax gap/ weak institutional structure is part of emerging market economies and their variable need for credit but it is not the immediate and specific cause of market movements – more immediately though capital flows (resulting from foreign borrowing).
I did not say tax gap does not matter rather it is not the proximate cause nor seen as such.
The point about savings is that foreign lenders creating debt do so having large capital/deposit bases encouraging risky lending. For example German banks, capitalised with excess German savings buying large amounts of US toxic subprime paper which funded the mortgage crisis in US or reckless lending by Chinese banks across Asia at the moment.
Excess savings globally does fund credit creation which funds investment in other countries.
It is arguable the relative importance of capital flows (arising from excess savings ) versus a tax gap.